HMRC reports on tax disputes

HMRC reports on tax disputes

Highlights

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As highlighted in last week’s Tax Matters Digest, HMRC have released a number of reports on their handling of tax disputes, as well as the annual report on the taxpayer charter, and their annual report and accounts for the year. The reports make interesting reading for those with an interest in how HMRC manage tax disputes, containing information on how they have been working, as well as their plans for the future.

This report outlines HMRC’s performance in resolving disputes with taxpayers for the period from April 2015 to March 2016, and includes another year’s data showing how HMRC are operating their published litigation and settlement strategy (LSS). The report shows a continuing trend in HMRC rejecting taxpayers’ settlement proposals, with over half of proposals being rejected. More cases have also been referred to business level case boards, as settlement opportunities close. HMRC have also been trialling alternative dispute resolution in multi taxpayer disputes, and will continue to explore whether it can be used for other issues.

The report also highlights that HMRC won 75 percent of tax cases taken to Tribunal last year, with 23 of 26 avoidance cases being won and securing £3.1 billion. HMRC also plan to triple the number of avoidance cases moving to litigation, and are working with the courts to arrange resource to manage the increased flow.

HMRC have also given details on changes to how they work – a new Diverted Profits Tax Board has been established, and new governance will be established for the Large Business special measures regime. An internal audit also revealed that HMRC case workers were missing opportunities to raise assessments within the appropriate time limits.

HMRC reported total tax revenues for the year as £536.8 billion, £19.1 billion more than last year. Interestingly, total compliance revenue remained steady, but a look at the breakdown of this revenue revealed the importance of income from accelerated payments in offsetting a fall in compliance revenue from other sources.

HMRC have set out their revised key objectives in this report, including transforming tax and payments for taxpayers, maximising revenue, tackling avoidance and evasion, and delivering a professional, efficient and engaged organisation. They acknowledge that their customer service last year fell short of the mark, but have highlighted the action taken to rectify this, including recruiting more customer service staff and investing in staff training, and improving their complaints procedure. The report also includes more information on the progress so far with Making Tax Digital, as well as their future plans in this area.